"We initiate coverage of HWCC with a Sector Weight rating. HWCC screens well with respect to our broader distributor thesis, including its niche market position and network capabilities. These dynamics, combined with a runway to “scaleup”, expand its product lines and penetrate adjacent markets create an intriguing small-cap distributor story with leverage to a pending oil & gas (one-third of sales) and broader industrial recovery. That said, NT earnings visibility remains limited and impacted by cyclical longer-cycle project spending and ongoing oil & gas uncertainty. Combined with more elevated balance sheet leverage, we view the risk/reward as appropriately balanced at current levels," said the analyst.

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